Free Market Capitalist September Dividend Income

|
Includes: ADP, APU, BDX, DOW, EMR, FPI, GE, GIS, JNJ, LMT, MCD, MMM, MSFT, O, PEP, RY, SYY, T
by: Penny Dividend Fortress

Summary

September 2016 income update.

Buy of the month was AbbVie.

Added to our stake in APU, CLX, ABT, ABBV, GE, T, RY and O.

I have been investing for 13 years now. Investing is a major passion of mine. Over the years I have owned many different companies. Most were good investments and some were not so good investments. I have learned a lot from the bad investments. I've also sold companies at the wrong times when I should have been buying instead. We all live and learn. Thirteen years of studying the markets and economy has lead me to put together this portfolio of companies. I hate to use the word "stocks". Taking pride in company ownership sounds much better to me.

Our (my wife and I) investing strategy is to only buy dividend paying companies to create a passive income for retirement and financial independence. We buy small to large cap companies with promising futures. A company's commitment to dividend growth is our most important measure followed by capital growth. We have a long term investing view. We buy our stocks through a low cost taxable brokerage account. Our goal 29 years from now is to have at least 14% yield on cost. We believe we have created a very strong portfolio capable of achieving this goal.

In this low yield environment we are fortunate that our yield on cost has been holding steady at 3.7%. Currently, four of our companies yield more than our yield on cost. They are AT&T (T) 4.7%, Royal Bank of Canada (RY) 4.1%, Amerigas Partners (APU) 8.2%, and Farmland Partners (NYSE:FPI) 4.5%. Thankfully, Microsoft (NASDAQ:MSFT), Lockheed Martin (NYSE:LMT), Royal Bank of Canada, and McDonald's (NYSE:MCD) have come through recently with good dividend increases.

End of September 2016 Dividend Yield on Cost 2045 Dividend Yield Goal
3.7% 14%
Click to enlarge

Starting with the month of April 2016 I will provide a monthly update that will analyze the performance and portfolio characteristics of our company stakes. Now let's get to the meat of the story.

September 2016 Income Results

From January of this year to the end of September our portfolio is up 12.27% -- surpassing the S&P 500 gain of 6.08%. This shows that superior companies produce great results. For the month of September, our portfolio had a return of -1.58%, compared to a -0.12% loss for the S&P 500. Below is a chart of June dividends vs. September dividends. We re-invest the dividends back into the same company that paid them. September dividends increased 16.7% from June, every company paid a higher amount.

Starting this month I will not include my retirement account at work. I'll wait to actually count that money at a later date when it's not in a work account. I'll use that money later on to buy more companies.

June EMR $0.54 September EMR $0.68 +26.0%
June JNJ $0.33 Sept. JNJ $0.39 +18.1%
June MMM $0.50 Sept. MMM $0.57 +14%
June MCD $0.35 Sept. MCD $0.43 +22.8%
June LMT $1.66 Sept. LMT $1.73 +4.2%
June BDX $0.16 Sept. BDX $0.20 +25.0%
June PEP $0.27 Sept. PEP $0.34 +26.0%
June O $0.54 Sept. O $0.70 +29.6%
June MSFT $0.20 Sept. MSFT $0.27 +35.0%
June Dividends $4.55 Sept. Dividends $5.31 +16.7%
Click to enlarge

September Stock Purchases and Why We Bought Them

My Buy of the Month was AbbVie (NYSE:ABBV) snatching up .2368 shares at $63.35 on September 20th. As of October 10th, AbbVie closed at $63.31, pretty much break even. On October 28th AbbVie should announce a dividend increase when it reports 3rd quarter earnings. The dividend hike could be in the 6%-10% range. AbbVie yields a juicy 3.6%. The pipeline is strong with new drugs and good acquisitions keep the future bright. AbbVie recently opened its first manufacturing plant in Asia to increase its global presence. The new facility will support the growth of oncology and women's health pipeline. We are long AbbVie.

Amerigas Partners (NYSE:APU): Year to date Amerigas stock has had a good run, up 30.6%. APU was founded in 1959 and is still growing strong as America's largest propane company. Amerigas has made six acquisitions year to date. With the Fall season here and winter not too far away, it's time to turn on the propane furnace to keep the house warm at night. It will be interesting to see how this year's winter will affect propane usage. We like APU for its strong 8.2% yield.

General Electric (NYSE:GE): General Electric has done a great job putting its Industrial Internet division together. It's Predix software has the opportunity to make GE the most premier software company. GE expects its digital revenue to reach $15 Billion in 2020. The numbers are just huge, how much wealth that could be created by the Industrial Internet of Things over the next 20 years. GE is our top holding and will be adding more as we can.

Abbott Labs (NYSE:ABT):Abbott continues to innovate exciting new products. For example, its FreeStyle Libre Pro allows diabetics to continually monitor their glucose levels. The FreeStyle Libre Pro just received FDA approval on September 28th. It's part of Abbott's sensing technology product line. More great products are on the way. In December, Abbott should increase its dividend for the 45th year in a row. I expect the dividend will be increased to $1.12. Abbott looks great for the future.

Royal Bank of Canada (NYSE:RY): Just like clockwork on August 24th Royal increased its quarterly dividend from $0.81 to $0.83 a 2.5% increase. The new dividend will be payable on November 24th to shareholders of record on October 26th. On the same day Royal announced record 3rd quarter earnings of $2.895 Billion, up 17% from the same period a year ago and up 13% from the second quarter. In the first nine months of the year Royal has earned a cool $7.9 Billion. Royal is one dependable company.

Realty Income (NYSE:O): Realty Income is down 13.9% from its August 52 week high of 72.30. I believe at the current price of $61-62 there is plenty of support for the share price. Realty on October 4th, announced a $600 million of 3% senior unsecured notes due 2027. Net proceeds will be used to repay borrowings under their revolving credit line and to buy more properties. Realty continues to use low cost borrowing to drive property and dividend growth, that we like to see.

Clorox (NYSE:CLX) Clorox is a great dividend paying defensive company for investors. CLX has been able to raise its dividend for 39 straight years. On October 26th, Clorox Healthcare announced a breakthrough new bleach cleaner called Fuzion. The new product will help healthcare facilities keep patients safer. Clorox is a innovative company that many people don't think of much. Clorox is a keeper for us.

AT&T (NYSE:T) It's getting closer and closer, a dividend increase from AT&T. The dividend increase is usually announced just before Christmas. I expect the $0.04 yearly increase to $1.96 per share. The end of data overage charges is a positive for the company and customers. AT&T was active in the bidding process for Yahoo and is in the hunt to own original content. According to Bloomberg, AT&T is looking to spend between $2 Billion - $50 Billion on media companies in the next three-five years.

We did not sell any companies in September. The chart below list what companies and how many shares we purchased in September. We are bullish on all the companies we purchased and are very happy to have more of each company.

APU .6103 Shares
GE .3243 Shares
O .3030 Shares
ABT .2393 Shares
ABBV .2368 Shares
CLX .0805 Shares
RY .3637 Shares
T .1584 Shares
Click to enlarge

Current Portfolio Positions

We believe that by picking superior individual companies we can achieve greater returns than just picking a market matching ETF or mutual fund. So far this year we are beating the S&P 500 by a good amount. We are bullish on every company we own, if not we would not own them in the first place.

We stay 100% invested in equities at all times. We do not invest in bonds because there is no growth in a bonds yield. Our cash level always stays around 0-1% of the portfolio. As a man of action, I'm not going to have money sitting around in the money market sidelines. The more income we can produce now will mean more income well into the future.

Company # of Shares Avg Share Cost Yearly Income % of Portfolio Income
AbbVie 0.8724 $61.42 $1.99 2.5%
Abbott Labs 2.0595 $40.30 $2.14 2.7%
Automatic Data Processing (NASDAQ:ADP) .8956 $85.79 $1.90 2.4%
Amerigas Partners 1.9140 $42.46 $7.20 9.0%
Becton Dickinson (NYSE:BDX) .3033 $150.28 $0.80 1.0%
Clorox .7146 $118.86 $2.28 2.9%
Dow Chemical (NYSE:DOW) 1.3318 $48.70 $2.45 3.1%
Emerson (NYSE:EMR) 1.4440 $51.85 $2.74 3.4%
FarmLand Partners 12.4168 $11.03 $6.33 8.0%
General Electric (GE) 11.2364 $29.02 $10.34 13.0%
General Mills (NYSE:GIS) .9425 $59.79 $1.80 2.3%
Johnson & Johnson (NYSE:JNJ) .4961 $107.26 $1.58 2.0%
Lockheed Martin (LMT) 1.0581 $198.63 $7.65 9.6%
McDonald's (MCD) .4817 $112.41 $1.81 2.3%
3M (NYSE:MMM) .5172 $159.65 $2.28 2.9%
Microsoft (MSFT) .7633 $54.51 $1.19 1.5%
Realty Income (O) 3.8036 $55.39 $9.20 11.5%
Pepsico (NYSE:PEP) .4511 $101.97 $1.35 1.7%
Royal Bank of Canada 2.1964 $59.12 $4.97 6.2%
Sysco Corp. (NYSE:SYY) 1.1323 $43.18 $1.40 1.8%
AT&T 4.4806 $36.30 $8.60 10.8%
Yearly Stock Retirement Dividends $80.00
Click to enlarge

In 2014 the portfolio had a return of 8.86%. For 2015 our portfolio returned 6.08%. Looking at the past year from 8/31/15 to 8/31/16 a strong 21.63% return. As a long term investor, I'm looking to hold all these companies for the next 10, 20, or 30 years from now.

Conclusion

We strive to produce a safe, reliable income, while not taking on too much dividend risk. As you can see a lot of my purchases are currently small. Most range in the $10-$50 per stock purchase. One does not need to make big stock purchases to march towards financial independence. Picking the right companies to buy is much more important. With my monthly articles I hope to be a good investing role model.

I hope you found my article interesting and looking forward to more articles from me. Feel free to ask any questions and follow me.

Disclosure: I am/we are long DOW, MSFT, EMR, LMT, FPI, RY, T, MMM, GE, GIS, MCD, SYY, O, ADP, ABBV, ABT, BDX, APU, CLX, PEP, JNJ.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Before you buy any stock you must do your own research. I may buy or sell any stock listed in my article in the next three business days.